Spain’s Prime Minister Pedro Sánchez is scheduled to meet with the European Union’s chief negotiator Michel Barnier to push for an annex addressing smuggling in the British territory, as well as cross-border workers and tax evasion. Gibraltar is also on the agenda.

As for Gibraltar, however, Spain will reportedly not bring up the matter of sovereignty over this territory, which was ceded to Great Britain in 1713 under the Treaty of Utrecht.

Spain’s El País newspaper quoted a source familiar with the matter as saying: “This is about working toward mutual benefit. We need a more balanced relationship. And in future, it is inevitable that Gibraltar will come closer to Spain because that means coming closer to the EU.”

The Brexit negotiation guidelines drafted by Brussels in March 2017 awarded Spain power over whether Gibraltar may benefit from any advantages of the future relationship between the UK and the EU. A clause in that document states that once the UK leaves the bloc, “no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without agreement between the Kingdom of Spain and the United Kingdom.”

According to El País, Madrid has begun a bilateral process with London that has just produced some progress in its sixth round of talks, said half a dozen sources consulted on the matter.

Currently, Gibraltar is the biggest entry point for illegal tobacco products into Spain. Also, Madrid wants stricter tax residence criteria to prevent businesses that operate in Spain from registering in Gibraltar for tax-avoidance purposes.

The Spanish executive also wants more stable conditions for the 10,000 to 12,000 workers who cross from Campo de Gibraltar into the overseas territory each day.

El País also noted that three sources familiar with the situation said that these initiatives are aimed at producing an annex to the Brexit deal listing specific measures to address the problems that Spain faces due to Gibraltar’s special status within the EU (it is not part of the customs union, it is exempted from the Common Agricultural Policy, and it does not apply VAT).

Foreign Minister Josep Borrell of Spain has been in touch with UK Minister for the Cabinet Office David Lidington, and he has also contacted Foreign Secretary Jeremy Hunt to lay out a detailed explanation of Spain’s position on the matter.